Just as the bearish sentiment in Apple hits a cyclical peak, the company is about to deliver the the biggest earnings blowout in the history of the world.

We're talking about the mother of all earnings blowouts. Well maybe not that big, but certainly the largest blowout in company history without question.

The difference between wealth and poverty on Wall Street is determined by ignoring the fluff, respecting the details and using reason to tease out the bottom-line reality generally overlooked by the masses. While everyone focuses on whether the passing of Steve Jobs marks the end of Apple, or whether the Amazon Kindle Fire will kill the iPad, the company is quietly selling millions upon millions of iPhones that far exceed even the most rosy expectations.

The most valuable company in America is about to grow its earnings by a whopping 84 percent this quarter, and Wall Street is asleep at the wheel. Apple's trailing twelve months of earnings is going to skyrocket from $27.68 to at least $33.00 which will finally drive Apple's P/E ratio down into the 11′s. While fund managers continue to debate whether they should buy Amazon (AMZN) at a 95 P/E ratio or Google at 22 P/E ratio, Apple will have reported more in revenue in one quarter than each of these companies reported all last year.

Bullish Cross Research expects Apple to report $11.75 in EPS on $42 billion in revenue in fiscal Q1, which compares to the Wall Street consensus estimates of $9.79 in EPS on $38 billion in revenue. The Bullish Cross outlook, if proven accurate, will amount to Apple reporting the largest revenue and earnings blowout in the history of the company. The table below outlines the Bullish Cross Fiscal Q1 2012 Earning Forecast for Apple Inc. and includes a very specific breakdown in our revenue expectations:

We expect this blowout to be largely driven by Wall Street underestimating the power of the iPhone side of the force. That will be the story this quarter. We expect Apple to conservatively report that it shipped 32-40 million iPhones far ahead of the 25 million iPhones that Wall Street expects out of the company. That will be the largest gap between Wall Street expectations and actual results since the iPhone was first introduced in 2007.

Yet, not only do we believe that Apple will comfortably ship 32 million iPhones without a hitch, we think our expectations will actually prove too conservative. In fact, we believe that Apple will actually end up reporting sales of more than 35 million iPhones which will cause the heart attack of at least several hundred short sellers. It will be a total deer-in-head-lights type earnings blowout where people just stand there and say "WTF" repeatedly while slowing doing the defeated head-shake CNBC contributor Steve Cortez will be among their number with his admitted Apple short position.

While we think Apple will basically more or less report in-line on iPads, iPods and Macs, iPhone sales will redefine everything Wall Street thought they knew about the company. The minute this report hits the street, the cyclical Apple bear will be shot point blank in the head. You're going to see the sentiment shift from ultra-bearish to ultra-bullish in mere seconds. We've seen it happen before and we're about to see it happen again in fiscal Q1. So the bears have about 3-4 more weeks to live. Enjoy it while it lasts.

Now it is important to understand that investors should view the Bullish Cross "official" outlook this quarter as being merely the lower boundary of what one should reasonably expect Apple to report. While we think there's a significant chance that Apple will end up reporting $11.75 in EPS on $42 billion in revenue, we still believe that there's a much higher likelihood that Apple will report a quarter that is more in-line with the outlook presented by my colleague at Asymco, Horace Dediu. Horace Dediu is one of the best analysts out there, is one of the leading experts on the global smart-phone market, and is a testament to his Alma Mater, the Harvard Business School.

Dediu has put together an expectation that is very much in-line with the Bullish Cross "high-point" forecast for Apple. Our "high-point" forecast is an expectation we put out every quarter that takes into account the possibility that Apple could deliver a perfect quarter. Notice that Apple has delivered a report that was in-line or slightly above the Bullish Cross high-point estimate twice in the past two years. Once in fiscal Q2 2010 and again in fiscal Q3 2011. Both times it resulted in Apple gapping up uncontrollably after being unhalted in after-hours. The table below outlines the Bullish Cross High-Point Outlook:

This expectation outlined by Dediu, if proven accurate, will result in an unimaginable blowout of epic proportions. We're talking about a top-line beat of nearly $7 billion with iPhone sales blowing out estimates by over 10.7 million units or nearly 50 percent. The most Apple has beaten the consensus on iPhones in any previous quarter has been by only a few million units or about 20 percent. That's at the high end. Here we're talking something completely unseen before on Wall Street. Missing iPhone units by 50 percent will force the street to go back to the drawing board and re-evaluate everything they thought they knew about the company.

The Dediu outlook is calling for Apple to report $12.30 in EPS on $44.6 billion in revenue on the back of sales of 35.7 million iPhones, 14.7 million iPads and 5.2 million Macs. Dediu is expecting iPhone sales to grow 120 percent leading to a 91 percent increase in earnings per share.

If this outlook by Dediu comes to pass, it will lead to the biggest gap-up in the history of the company. In fact, I think such a report will lead to at least a 10 percent gap-up in the stock if not more. What I would expect to see is Apple halted at least 10 minutes before the results are released and once Apple resumes trading, we should see the stock $50.00 higher. If Apple is trading around $400 when it reports its results, it will gap-up to $450. If it's trading at around $430 a share when it repots, it will test $500 that week.

This is a once in a decade type earnings reaction that we've seen happen a few times with Google. Haven't really seen that type of an earnings reaction out of Apple yet. And that's mostly because Apple typically runs into the results.

Moreover, Apple tends to almost always sell-off after reporting earnings in fiscal Q1 as the stock tends to rally significantly between September and January. Here, Apple has been trading sideways since July. So there hasn't been much of a run-up in the stock price.

Thus, the type of reaction that we will get this quarter will largely depend on the type of pre-earnings run-up we see in the stock. If the bearish sentiment and trading action continues up until the day Apple reports earnings and we get a Horace Dediu blowout, Apple's going up $50.00.

Again, this type of a blowout expected by Dediu is a once in a decade type earnings blowout and we'll observe a corresponding once in a decade type response in the stock price. Yet it is important remember that Dediu is presenting what is the equivalent of our high-point outlook. If everything goes perfectly, we will see his expectations come to fruition.

But if the Bullish Cross "official" outlook is to be viewed as the lower boundary, then the Horace Dediu outlook forms the upper boundary. You should expect Apple to report between those two outlooks. And when it does, it will be a record blowout regardless. Our lower boundary is already calling for a record revenue and earnings blowout out of Apple.

For those who are interested in the events and reasons leading up to this eventual blowout, we basically explain how it came to this in two articles entitled, Why Apple's Guidance is Still Conservative and How to Properly use Apple's Guidance to Accurately Forecast Earnings.

Andy M. Zaky is a fund manager at Bullish Cross Capital and the editor of the Bullish Cross Financial Newsletter. Bullish Cross Capital owns a significant long position in Apple, Inc.

... and if he's right... well, let's just say that there will be shorts filling their shorts.

[but there is always the possibility that even if Apple pulled off a $45 billion quarter the analysts would say that Apple will never be able to keep up that momentum and therefore give Apple a neutral rating. Fiscal q2 is unveiled in April and Apple shows $35 billion in rev... the analysts say, "I told you so!"... and AAPL declines 10% by the end of May.)

Largest earnings blowout in the history of the world. Run while you can. Take cover. Happens right after closing bell. Go, go, go.

[LOL. Wipes tears from eyes.] Seriously though, Andy Zaky has a good record. He posts his numbers before the call and I'm astonished that he's gotten so much closer than analysts with, ahem, less flair for the dramatic. I appreciate that his posts appear here but make sure to take a heaping measure of salt with any predictions. ("It is difficult to make predictions, especially about the future." - Yogi Berra)

Waiting for Hellacool to troll on here saying that this is not what really matters, that Apple's robots are responsible for all these incredible sales and that Android will take over the world in 5 years and that Apple will the be richest company, albeit in a niche, which doesn't really matter. All that matters is that Google's schlong is longer than Apple's, or something like that.

sadly their super-conservative (or nearly useless as the articles say) earnings outlook for the next quarter don't really help and pulsl the stock back down. There seems to be a spike after the initial earnings numbers, but as the outlook numbers come up and are then talked about in the conference call, the stock pulls back a bit. +10% in AH is +3 to +5% by the end of the next market day

... biggest earnings blowout in the history of the world. ... largest blowout in company history ...

I'd just like to point out that "blowout" is a superlative term and thus there is not really any such thing as a "big, bigger or biggest" blowout.
A blowout is a blowout. There are not small medium and large varieties.

Waiting for Hellacool to troll on here saying that this is not what really matters, that Apple's robots are responsible for all these incredible sales and that Android will take over the world in 5 years and that Apple will the be richest company, albeit in a niche, which doesn't really matter. All that matters is that Google's schlong is longer than Apple's, or something like that.

I'd just like to point out that "blowout" is a superlative term and thus there is not really any such thing as a "big, bigger or biggest" blowout.
A blowout is a blowout. There are not small medium and large varieties.

If the share price is going to continue to fall, it won't matter to shareholders how much revenue Apple is pulling in. I'm not blaming Apple for the situation, I'm only saying that bullish outlooks mean nothing if shareholders continue to see bearish results. When it comes to Apple, Wall Street continues to look years into the future so that they can devalue the company despite current record earnings. You might say that Apple is being priced to fail which makes very little logical sense, but if the people running Wall Street are represented by John Corzine, then it's perfectly clear. My case in point is that Apple is performing far better than the financial institutions that are claiming Apple's future growth potential is rather limited. What right have they got to decide such a thing when their own institutions are in financial shambles? I don't believe they are qualified to accurately predict Apple's future.

Guys like Zaky and Dediu enjoy playing with numbers and that's all they see. The people that are actually controlling the market are not true numbers people. They're probably just high rolling gamblers or maybe there's no risk at all because they actually control the market to suit themselves. I'm not sure, but when a company's share price disconnects from fundamentals, then something is most definitely wrong. It wouldn't even make sense to build a successful company if that is the outcome. I've been Apple long since 2004 and I really shouldn't be griping since I've made money but it's getting annoying hearing these protests about the market cheating Apple shareholders because there probably won't be any changes made in the near future. Apple shareholders will just have to suck it up or look elsewhere for share gains.

Just as the bearish sentiment in Apple hits a cyclical peak, the company is about to deliver the the biggest earnings blowout in the history of the world.

The problem is that the subsequent quarters are not going to be that great. That's what the Street is perhaps afraid of. 4s holiday demand will run out of juice and then Apple will be left in the vacuum for 2-3 quarters in a row until iPhone 5 is out.

Since January of 2007 Microsoft has gone from $31.21 to $25.95 .... down 17%. During the same timeframe Apple has INCREASED over 300% .... from $94.62 to $380.66. Personally, I don't think any amount of dividends would make it worthwhile choosing MSFT over Apple. IMHO dividends are usually used by companies whose "attractiveness" has stalled or worse yet, peaked.

Apple, bigger than Google, √ ..... bigger than Microsoft, √ The universe is unfolding as it should. Thanks, Apple.

Since January of 2007 Microsoft has gone from $31.21 to $25.95 .... down 17%. During the same timeframe Apple has INCREASED over 300% .... from $94.62 to $380.66. Personally, I don't think any amount of dividends would make it worthwhile choosing MSFT over Apple. IMHO dividends are usually used by companies whose "attractiveness" has stalled or worse yet, peaked.

I wouldn't touch MSFT stock either vs AAPL, I was just saying because a stock's price hasn't changed much, it doesn't mean you can't make any money off it.

The problem is that the subsequent quarters are not going to be that great. That's what the Street is perhaps afraid of. 4s holiday demand will run out of juice and then Apple will be left in the vacuum for 2-3 quarters in a row until iPhone 5 is out.

That's a foolish argument. First, there is no obvious sign of a slowdown.

Second, even if there IS a slowdown and Apple's earnings drop by 80%, it's still a better P/E than Amazon. Even if earnings drop by 50%, it's the same P/E as Google.

Projections should be based on most reasonable assumptions - not worst possible scenarios.

"I'm way over my head when it comes to technical issues like this"Gatorguy 5/31/13

I can make a good argument that Apple is over priced right now. You can disagree with that but really there is no need to get emotional about it.

Then please feel free to do so. Let's see how 'good' your argument is.

Quote:

Originally Posted by jason98

Not sure which argument is more foolish mine or yours. Holiday season is not over yet, thus no sign of slowdown...

That's why people look at year over year results rather than quarter over quarter. For years, every single quarter, Apple has been well ahead of the same quarter in the previous year. That percentage looks like it's actually growing rather than shrinking.

Since that removes your 'seasonality' argument, feel free to show the evidence that Apple is slowing down.

"I'm way over my head when it comes to technical issues like this"Gatorguy 5/31/13

Several of you need to cut out the political rants. Regardless of your viewpoint, if it's political, it doesn't need to be articulated anywhere on AI except Political Outsider. When I get back, I'll start deleting comments.

The law of large numbers is affecting AAPL price. The market cap is huge and is already widely held with large % in most portfolios. It takes a lot of boost earnings.

Being a tech company, it will take a lot just to maintain the revenues for a sustained period... very different from a company like MCD, KO. Then there is the competition. That is why the PE keeps on getting compressed. With MCD, KO, etc it is not the Koreans are coming with their own junk food and Coke!

Apple will have to further establish itself as a consumer brand and a seller of content to calm down Wall Street. Theoretically, dividends do no matter. However, if the company makes $50/s per year and have $100B in cash, they could give $20/s per year for a 5% yield. Funds are hungry for yield.

Wizard69, I can't really engage with your off-topic rant, but I notice that you spell "lose" -- as in lose your shirt -- with two "o"s -- as in "loose their jobs." And then elsewhere I have seen you spell "too" -- as in "too much" -- with one "o" -- you say "to much." Are you sure you are competent to judge who is the most moronic president we have ever had? At least our current one knows enough about language to say "nuclear."

On topic, I agree with you that Apple's ongoing success, and its likely impetus in getting Samsung to expand in Texas, are the way economies do and should develop. I'm thinking that "the Apple effect" may soon be quantifiable in macroeconomic terms. There have to be secondary effects from putting a computer in everybody's pocket and hands.

The reality is every time this country gets a bug up it's ass about taxing the rich, taxing luxuries and the like, lots of working Americans loose their jobs.

I think this is backwards, and should read, "Every time lots of working Americans lose their jobs, this country gets a bug up its ass about taxing the rich." I don't think most Americans mind rich people being rich if they can make an honest living for themselves. But when unemployment doubles and there's talk about huge cuts at all levels of government, then we have a problem and it's reasonable to question whether record low personal income taxes for wealthy Americans is part of the solution or part of the problem.

Then please feel free to do so. Let's see how 'good' your argument is.

That's why people look at year over year results rather than quarter over quarter. For years, every single quarter, Apple has been well ahead of the same quarter in the previous year. That percentage looks like it's actually growing rather than shrinking.

Since that removes your 'seasonality' argument, feel free to show the evidence that Apple is slowing down.

In the context of the Stock Market, short term outlook DOES matter. Also in case of Apple, seasonality is somewhat artificially induced. People are ready to buy cutting edge cell phones any time of a year but Apple delivers it only once.

What do you think happened in the quarter prior to 4s release. If it was not a slowdown then what? The same will happen in the first calendar quarters of 2012. And if iPhone LTE is not released by summer, sales will drop big time. The Street does not like these risks.

Being a tech company, it will take a lot just to maintain the revenues for a sustained period... very different from a company like MCD, KO. Then there is the competition. That is why the PE keeps on getting compressed. With MCD, KO, etc it is not the Koreans are coming with their own junk food and Coke!

That's not true. Apple doesn't have to keep growing to maintain the share price. The current share price is premised on either no growth or actually shrinking revenues (since the P/E is lower than the average tech company). Even if Apple does nothing at all, their revenues are likely to be at least flat, so the P/E is too low even with no growth.

Quote:

Originally Posted by AjitMD

Apple will have to further establish itself as a consumer brand and a seller of content to calm down Wall Street. Theoretically, dividends do no matter. However, if the company makes $50/s per year and have $100B in cash, they could give $20/s per year for a 5% yield. Funds are hungry for yield.

This simple analysis is completely wrong. First, if they use some of the cash for dividends, it reduces the 'net worth' of the company by a comparable amount. For example, Apple has $100 B today - which is factored into the share price. If they give out $20 B in dividends, they only have $80 B left - which has a negative impact on share price.

Even if you want to use the 'pay out of future earnings' card, it still has the same effect. Let's say Apple adds $30 B in cash this quarter. If they don't pay dividends, they will have $130 B in cash. If they do pay $20 B, then they'll only have $110 B in cash, which would result in a lower share value.

If the investors are so eager to generate cash on a regular basis, they can simply sell off 3% of their AAPL ever quarter and get the same effect. Actually, it would be even better because the dividends will be taxed at regular rates (up to 39.6%) while if they sell the stock, they will pay only capital gains rates, and only on the difference between selling price and purchase price.

Dividends are one of those things that sounds better on paper than in reality. For a utility, they make a lot of sense. For a rapidly growing market leader? Not so much.

"I'm way over my head when it comes to technical issues like this"Gatorguy 5/31/13

sadly their super-conservative (or nearly useless as the articles say) earnings outlook for the next quarter don't really help and pulsl the stock back down. There seems to be a spike after the initial earnings numbers, but as the outlook numbers come up and are then talked about in the conference call, the stock pulls back a bit. +10% in AH is +3 to +5% by the end of the next market day

Historically, tech shares ramp up in the calendar 4th quarter, and earnings simply justify this run-up. This year, Apple has been flat for 5 months, despite a 121% and 51% earnings growth in that timeframe.

The problem is that the broader market malaise has to get resolved and things need to get fixed in Europe to make that happen.

I'd just like to point out that "blowout" is a superlative term and thus there is not really any such thing as a "big, bigger or biggest" blowout.
A blowout is a blowout. There are not small medium and large varieties.

You can point all you like, but most of us would defer to the dictionary. The Free Dictionary (online) says, "A lopsided victory or thorough defeat."